U.S. 30-year yields rise most in 7 months as jobs top forecast

Treasuries fell, boosting the 30-year bond yields by the most in seven months, after a report showed U.S. employers added more jobs in April than forecast, boosting the outlook for economic growth and trimming demand for refuge.

U.S. 10-year notes yields rose the most since January as the U.S. employment rate unexpectedly fell to 7.5%, a four-year low. Yields on benchmark notes had reached to the lowest levels this year this week as the Federal Reserve said it may increase or reduce the size its purchases of government and mortgage debt as conditions warrant under its quantitative- easing stimulus strategy.

“This nonfarm payroll number establishes a floor under Treasury yields,” said Donald Ellenberger, who oversees about $10 billion as co-head of government and mortgage-backed securities at Federated Investors in Pittsburgh. “The Fed continues to have its foot on the accelerator. That will keep a lid on how high Treasury yields can go. At the same time, this was a pretty decent payroll number, so that’s likely to put a floor on how low yields can go.”

The benchmark 10-year note yield rose 10 basis points, or 0.10 percentage point, to 1.73% as of 10:22 a.m. in New York, according to Bloomberg Bond Trader prices. The price of the 2% note due in February 2023 fell 29/32, or $9.06 per $1,000 face amount, to 102 14/32.

The 30-year bond added 12 basis points, the most since Sept. 14, to 2.94%.

Yield Levels

It yield reached 1.61% on May 1, the lowest level since Dec. 11. The gap between Treasuries maturing in two- and 10-years widened to 1.50 percentage points, the most since April 11, reflecting market sentiment for faster economic growth.

Payrolls expanded by 165,000 workers last month following a revised 138,000 increase in March that was larger than first estimated, Labor Department figures showed today in Washington. The median forecast of 90 economists surveyed by Bloomberg projected a 140,000 gain. Revisions to the prior two months’ reports added a total of 114,000 jobs to the employment count in February and March.

The jobless rate dropped to the lowest level since December 2008 from 7.6% in March.

“This was a solid report across the board,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, one of the 21 primary dealers that trade with the Fed. “Some of the talk of more QE is probably fading.”